Jessie Duncan And Another V. The Mfv Marigold Pd 145 And Others
| Jurisdiction | Scotland |
| Judge | Lord Reed |
| Neutral Citation | [2006] CSOH 128 |
| Date | 22 August 2006 |
| Docket Number | A7/05 |
| Court | Court of Session |
| Published date | 22 August 2006 |
| OUTER HOUSE, COURT OF SESSION [2006] CSOH 128 | |
| A7/05 | OPINION OF LORD REED in the cause MRS JESSIE DUNCAN AND ANOTHER Pursuers against THE MFV MARIGOLD PD145 AND OTHERS Defenders: ________________ |
Pursuers: Ennis; Brodies, WS (for Messrs Stewart & Watson, Peterhead)
Defenders: Artis; Balfour & Manson, WS (for Iain Smith & Co, Aberdeen)
22 August 2006
Introduction
[1] The late Michael Duncan ("the deceased") was one of four partners in a firm which operated a fishing boat, the Marigold. He died on 18 March 2000. Cessation accounts were drawn up as at that date, without the agreement of the surviving partners. The accounts brought out a balance in the deceased's capital account of £133,537. That sum was not however paid to the deceased's executors, who are the pursuers in the present action. The surviving partners, who are the defenders in the present action, continued to operate the Marigold for several years, but eventually wound up the business. The assets were realised for much less than the amount which appeared in the cessation accounts. On the basis of the amounts realised, the defenders calculate that the share of the final surplus due to the pursuers is £14,323. The central issue between the parties is whether the pursuers should receive the sum brought out as due to the deceased's estate in the cessation accounts, or the deceased's share of the surplus of assets over liabilities at the completion of the winding up. There is also an issue as to the sum payable to the pursuers in respect of the defenders' use of the assets of the former partnership between the date of the deceased's death and the completion of the winding up.
[2] The stage which the action has reached is a discussion of the parties' preliminary pleas. The court is therefore concerned primarily with their respective cases as pleaded, rather than with evidence. It was however a matter of agreement that the court should have regard to the cessation accounts, to which both parties' pleadings refer.
The parties' positions
[3] It may be helpful to begin by explaining the parties' respective positions. It is not in dispute that the deceased and the defenders were partners in a partnership at will governed by Scots law, and that the partnership was dissolved upon the death of the deceased. It is equally not in dispute that the partnership engaged in commercial fishing; that its principal asset was the Marigold, together with the pressure stock licence and quota pertaining to it; and that the profits from the business were divided in specified proportions, the deceased's share being 22/64ths. The pursuers' averment that the assets of the business should, on dissolution, be divided in the same proportions is not formally admitted but does not appear to be in dispute, the defenders' calculation of the sum due to the pursuers being 22/64ths of what is said to have been the final surplus on winding up.
[4] The pursuers aver that, after the deceased died, the books and records of the partnership were forwarded by the partnership's agents, Caley Fisheries, to the partnership's accountants, Messrs Leiper & Summers. Caley Fisheries also provided the accountants with valuations of the partnership's assets. The accountants then prepared cessation accounts as at the date of death. I was informed, and it was not disputed, that the accounts were prepared without instructions to do so. It is averred that the accounts were prepared in accordance with appropriate accounting practice, and that they are a true and accurate statement of the partnership's profit and loss account and balance sheet, and of the partners' capital accounts, as at the date of death.
[5] The accounts cover the period from 1 January 2000 to 17 March 2000, the previous accounts having been for the year ended 31 December 1999. It is apparent from the accounts that they are based on a revaluation of the fishing boat, its value being stated at £825,000 as at 17 March 2000, compared with a figure of £360,000 as at 1 January 2000. Generally, the accounts are detailed and specific.
[6] In these circumstances, the pursuers conclude, first, for declarator that the accounts are true and accurate, and that the pursuers are entitled to payment of the share standing at credit of the deceased in his capital account, and secondly, for payment of £133,537 with interest from 18 March 2000.
[7] The defenders on the other hand aver:
"Following [the deceased's] death, the surviving partners decided with the concurrence of the pursuers to maintain the business and assets of the partnership whilst seeking an agreed settlement of the net capital value attributable to the share of the deceased. The pursuers sought agreement from the defenders to purchase the share. They sought a price which the defenders considered to be unrealistic. Various proposals were exchanged but no agreement was reached. Eventually, in about August 2002 the defenders as the surviving partners decided that, absent agreement, a winding up of the partnership could not be delayed further and that the vessel, licence and quotas must be sold. At that time the first pursuer [the widow of the deceased] refused to countenance the sale of the vessel. After further discussion with the pursuers the winding up was put in hand by the defenders in about October 2002".
[8] The defenders go on to aver that they were advised by Caley Fisheries that the best return would be achieved by decommissioning the vessel under a statutory scheme, and by selling the quota. The pursuers were consulted on the decommissioning proposal and agreed, the first pursuer signing the necessary application form. The application for a decommissioning grant was initially unsuccessful. In August 2003, however, the Scottish Executive made a conditional offer of a grant of £312,000, which was accepted in October 2003 with the concurrence of the pursuers, the first pursuer signing the acceptance form. The fishing quota was transferred to a "dummy vessel", and was finally sold and transferred to the Scottish Fishermen's Organisation for £150,000 under a written agreement entered into in March and April 2005. It is averred that the sums of £312,000 and £150,000 were "paid into the partnership's account with the Bank of Scotland and applied by them to the extinction of partnership debts to the bank". After paying "partnership debts", a surplus of £41,688 remained. The defenders maintain that the deceased's share of that sum - £14,323 - is the amount due to the pursuers. In relation to the difference between the £462,000 received in total for the Marigold and its quota, and the £825,000 figure in the accounts prepared by Leiper & Summers, I was informed that the value of the quota had diminished considerably between 2000 and 2005 as a result of changes in the Common Fisheries Policy, and that the vessel itself had suffered wear and tear, having undergone an extensive refit (costing over £200,000) not long before the death of the deceased, and having continued to be used for fishing between 2000 and its eventual decommissioning. The defenders also aver that Leiper & Summers in any event overstated the value of the deceased's share.
[9] In response to the defenders' averments, the pursuers maintain that the correct construction to place upon the conduct of the defenders after the death of the deceased, in continuing to engage in commercial fishing using the Marigold, is that they formed a new partnership at will. That second partnership continued to use the assets of the original partnership. It borrowed additional amounts. Eventually, under pressure from its creditors, the second partnership decided to wind up its affairs, and proceeded to decommission the Marigold and to sell the quota. The executors were required to execute documentation in order for that process to be completed. It was the second partnership which received the resultant proceeds.
[10] In these circumstances, in addition to a capital sum of £133,537, the pursuers also seek a payment in respect of the use by the defenders of the deceased's share of the assets of the original partnership. The amount sought is calculated as 5 per cent per annum of the value of the deceased's share of the Marigold and its quota as at the date of death. In that regard, the pursuers aver that the value of the Marigold, and of the quota, were £422,300 and £618,730 respectively as at the date of death. These figures are higher than those in the accounts, and are based on valuations subsequently obtained. On the basis of those valuations, the amount due has been calculated as £53,678, and there is a conclusion for payment of that sum. It is acknowledged that the first pursuer has received certain payments from the defenders.
[11] In answer to this claim, the defenders aver:
"[F]rom the date of [the deceased's] death the first pursuer continued to receive his share [of earnings] until the cessation of fishing. On the occasion of each fishing trip settlement she was paid a sum equal to that of the crew members ....Esto, which is denied, the surviving partners comprised a new partnership (the Second Partnership) the first pursuer was a partner thereof and assumed her husband's share of the assets. In the course of a meeting with [one of the defenders] in the Autumn of 2001 she volunteered that she would 'step into his [the deceased's] shoes' until such time as her circumstances changed. She assumed his share as her own. On the hypothesis of a Second Partnership she contributed to the assets, as her own to give, the deceased's share of the assets in the former partnership. Thereafter she received all payments due to a partner in respect of that share.....The first pursuer has received the profit attributable to her husband's share of the partnership assets, and continued to do so until those assets ceased to be used".
[12] The defenders also maintain that, in the event that the contention that there was a second...
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